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To: Dealer who wrote (6976)	10/10/2000 6:11:07 PM
From: Dealer	Read Replies (2) \| Respond to of 65232

LU--Lucent Cuts Growth Forecast Again NEW YORK (Reuters) - Telecommunications equipment maker Lucent Technologies Inc. (NYSE:LU - news) again slashed its growth outlook, saying fourth-quarter profits would fall 25 to 29 percent amid lower-than-expected optical sales and a faster drop in sales of traditional telephone switch equipment. Lucent, which has been struggling to recover from product development and manufacturing missteps, said on Tuesday it expects fourth-quarter pro forma earnings from continuing operations to be 17-18 cents a share, compared with 24 cents a year ago. Analysts had expected the company to earn 27 cents a share, according to First Call/Thomson Financial. The expected drop in profits contrasts Lucent's forecast in July, when it said fourth quarter earnings would likely grow about 15 percent. The lowered forecast marks the third time this year that Lucent has cut its growth outlook. Murray Hill, N.J.-based Lucent expects pro forma revenues from continuing operations to be $9.3 billion to $9.4 billion, a 14 to 15 percent increase over the same period a year ago. Lucent originally had expected fourth-quarter revenues to increase about 20 percent. The company cited several reasons for the shortfall. Revenues from optical networking systems, including optical fiber, were down about 5 percent. The drop in optical sales comes amid the greatest demand for optical equipment that the telecommunications market has ever seen. Sales of switching systems were down about 13 percent, Lucent said. Lucent also suffered from credit concerns in the emerging service provider market that led to increasing reserves for bad debt and a greater-than-anticipated decline in telephone circuit switch sales and margins. Its wireless business, meanwhile, would report flat growth primarily due to the comparison to the year-ago quarter when the company had a major foreign contract. Rumors that Lucent would miss its fourth-quarter targets have circulated for weeks, pushing the company's stock price lower. Lucent's stock has fallen 58 percent so far this year. The dismal growth outlook now puts additional pressure on Lucent's Chairman, Rich McGinn, whose status at the company was already seen as precarious, analysts said. ``The word on the street was that they would miss the quarter. And if they did, that McGinn's head may finally roll,'' said one industry analyst who declined to be named. Lucent had recently retained executive search firm Korn/Ferry International to find a replacement for McGinn, the analyst said. Lucent declined to comment. For the full year, Lucent expects pro forma revenue from continuing operations to increase 14 percent, and pro forma earnings per share from continuing operations to drop 10 to 11 percent. The lower fourth-quarter performance will also cut its outlook for 2001, but no details were provided. Lucent, once a Wall Street darling, has been working to rebuild investor confidence, catch up to rivals in the booming optical networking industry and restructure its operations. Lucent's woes began in January when it said it had been unable to manufacture new-generation networking products fast enough to keep up with robust customer demand. Lucent admitted it failed to gauge customers' quick shift toward high-speed fiber optic products and it fell behind rivals such as Nortel Networks Corp. (NYSE:NT - news)(Toronto:NT.TO - news) Lucent has been battling Nortel and Cisco Systems Inc. (NasdaqNM:CSCO - news) to supply telephone companies, Internet service providers and large corporations with sophisticated equipment that can handle increasingly large volumes of data and voice traffic. Catching up to its rivals has been more difficult and time- consuming than Lucent planned. Shares of Lucent closed at $31-3/8, down 15/16 on the New York Stock Exchange (news - web sites). The company's statements came after the close. In after-hours activity, the stock last traded at $25. Pro forma results are adjusted to exclude the enterprise networks business that has been spun off, the consumer products business, amortization of goodwill, and other items.